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Now that the rise in Consumption Tax to 8% then 10% is all
but assured, we think there are some very interesting
changes in store for how the Japanese Government and
Japanese companies think about making money. In particular,
the fear of not having financial security may finally push
the authorities to internationalize the country at a speed
that civilized debate could not.

Traditionally Japanese firms have opted for plenty of
people and the "factory model" -- where, regardless of
whether it was a factory for making things or a more
abstract one, like a call center or a gyudon chain, they
have never shied away from hiring more people to make their
plans happen. But now that the increased consumption taxes
are being piled on top of soaring social welfare payments,
the bite is starting to be felt. We feel that the
consumption tax is insidious because the Japanese model
ignores the cost of people as a cost of inputs when
calculating taxes payable, thus increasing the tax burden
for those companies who continue to hire local staff. We
find it ironic that the Japanese government in its search
for financial security ignores the one input that for most
services businesses comprises 70% of their costs.

Thus it is easy to come to the conclusion that people-heavy
domestic companies are going to either downsize their staff
levels with automation and heavier work loads on remaining
employees, or off-shore them. Either way, this will
exacerbate the tax base shrinkage and will shorten the
credit extension the consumption tax rise has brought.

Below is a snapshot of how companies are taxed at the
moment. As you can see there are the usual taxes which add
up to 38% or so, then there is the ever-rising social
insurance cost, which, since the Tax Office is going to be
collecting Social Insurance premiums in the future, will
indeed be just another tax to pay. For services based
companies where 2/3 of their costs are in hiring people, it
means that social insurance adds up to an indirect tax of an
extra 12.5% (18% x 70%) -- meaning that they will be paying
on a compulsory basis about 51% of their earnings in tax.

[Continued below...]

--- NAGAMINE & MISHIMA - Securing Your Success in Japan ---

Starting a new company in Japan? Looking to streamline
your current operations?

The team of bilingual experts at Nagamine & Mishima is able
to provide high quality accounting, payroll and tax
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Our services help customers improve their operations and
bottom line results.

Estimate of taxes paid by mid-size services company in
Tokyo:
* National tax 28% (after current surcharge adjustment,
runs to 2015 and may decrease 2.5% -- maybe)
* Local and Enterprise taxes 10% approx. (mid-sized firm in
Tokyo)
* Social insurance 15.2% now and 18% in 5 years time (average
salaried worker in Tokyo)
* Consumption tax 5% now and 10% by 2014 (probably 15% in 5
years time)

Total tax burden: 51% of corporate income

Actually, our calculations pre-suppose that those companies
are making profits and can actually pay the taxes. In fact,
about 70% of Japanese companies are on the borderline
already they don't make enough profit to pay taxes. Of the
remainder, the Economist reckons that a quarter of listed
companies have profits of less than 2% and only 7% of
companies, almost all exporters and internet firms, are
making more than 15%.

Given that consumption tax and social insurance are both
taxes that ignore the actual profits of a company, the
proposed increases in both imposts threaten to tip a
large number of companies even deeper into the red and into
bankruptcy. How many? Well, we estimate that there are
about 100,000 companies not paying their bank loan
principal payments, per the loan repayments moratorium set
up by Kamei 3 years ago, and most of these are not healthy
enough to take more hits. Actually, the real attitude of
the government to these companies -- whether to "purge"
them or continue supporting them, will become clear once it
announces before March next year whether it will extend the
moratorium or let it lapse. If they don't extend, you can
expect a big surge of failures and most likely some major
bank problems mid-2013 as well.

So we have a scenario of weeding out of employers and
those remaining employing substantially less people in
Japan. We think the tax authorities can already see this
writing on the wall and therefore have realized they need
to urgently move the tax base from salaries and company
profits, which will continue shrinking, and put it on
living/consuming instead. At least in that way they can
claw back income from retired people, the unemployed, and
especially families with the most voracious consumers of
all -- kids.

So if you were a beady eyed tax man and you could see the
tax base falling, how would you go about raising more
revenue without sending a bunch of companies bankrupt? Well
in the USA, the IRS has come up with a very imaginative
solution of casting their tax base net worldwide, through
their pending FATCA legislation. This will go after the 7m
US citizens and green card holders (think Asians and
Chinese in particular) who work abroad but don't
necessarily report their off-shore earnings to the IRS. Now
with FATCA, anyone looking to stash money with a non-US
financial institution will quickly find themselves being
caught up in a net of reporting back to the IRS.

There is a lesson to be learned here by Japan. Firstly,
look to the 1m or so Japanese living abroad for taxes, and
secondly increase the tax base with foreigners. How? Well:
* Permanent residence should be purchasable (sorry,
"investment-driven"), just as it is for green cards, which
would bring in some thousands of wealthy Asian retirees
every spring and autumn, should they have flexible
access. Think Miami and snowbirds from Canada.
* Increase tourism drastically, since every tourist pays
consumption tax each time they sleep and eat.
* Make it easier for foreigners to buy assets in Japan, and
thus move real cash here.

The types of transactions that will help Japan's financial
problems the most are those of a capital intensive nature.
At the high end you have the purchase of companies and
their assets, where the value is high but the frequency is
low. The government is possibly going to be holding
thousands of bad loans next year and has the right to
liquidate those companies. Putting them on the block for
foreign investors could be an interesting proposition. Then
at the other end, there is the purchase of land, where the
value is moderate but the frequency (depending on
government controls) could be high. There are 4.5m empty
homes in Japan and dozens of prefectures with continuously
falling land prices and little or no domestic demand to buy
-- so there is plenty of inventory.

Luckily, there are also plenty of buyers as well, if you
consider that there are 2.7m millionaires in China (63,500
with assets of US$15m or more) and none of them is able to
own land outright in their own country nor to pass land
assets on to their kids. And now they are probably going to
be less enamored with moving to the USA thanks to FATCA.
This is a great opportunity for Japan to hang out a
selective "welcome" sign. Indeed, we think that this
thought has already occurred to the Japanese government,
which is why they are aggressively relaxing travel visa
restrictions.

Yes, sure, if too much happens too fast, it will cause
friction with the right wingers. But done right, quietly
with companies representing the real purchasers (at the
same time providing a work-around for Japan's high death
taxes), the Japanese real estate market could bring in tens
of billions of dollars of new tax payers with no strings
attached. Heck, we don't even have to cover hospital and
aged care to these people, since they wouldn't have paid
into the Japanese social welfare system for at least 25
years... :-)

**************
Speaking of land, our sister company Metropolis is listing
a wonderful wooded plot next to the 27-hole Enrei golf
course in Suwa, Nagano, for just JPY6,800,000 (about
US$80,000). The property is 1,032 square meters, and is
located right on the edge of the golf course, so that you
will never be built out. See photos and a full description
here.

The owner is keen to sell quickly, which is why the
property is so competitively priced.

...The information janitors/

***------------------------****-------------------------***

-------------------- Delta Air Lines ----------------------

ATLANTA’S NEW TERMINAL IS NOW OPEN TO THE WORLD

On May 16th, the Maynard H. Jackson Jr. International
Terminal opened at Hartsfield-Jackson Atlanta International
Airport (ATL). This state-of-the-art, LEED-certified
terminal accommodates more passengers and makes
international travel a breeze.

Customers travelling from Asia Pacific to Atlanta will
arrive mostly at Concourses E or F, while flights from
"pre-cleared" countries will arrive on Concourses T through
D.

If Atlanta is your final destination:
- You will proceed through Passport Control and claim your
baggage at the new international terminal.
- You will no longer need to recheck your baggage upon
exiting Customs.
- There is a passenger pickup area and ground
transportation center at the new international terminal.
- From the international terminal, complimentary shuttles
are available to both the domestic terminal which includes
MARTA, as well as to the rental car center.

We know these new arrangements will smooth your trip to
Atlanta and we look forward to serving you on your next
flight.

For more information about the international terminal,
please visit delta.com
-----------------------------------------------------------

+++ NEWS

- Excitement over budget stand-off
- BlackRock is Japan's leading asset manager
- Japan commits to buy first four F-35s
- Tokyo Metro introducing interpreting service for tourists
- Rumors of October election

=> Excitement over budget stand-off

The foreign media have been getting excited over a comment
by the Finance Minister that the government may not be able
to pay its bills if the budget stand-off doesn't end soon.
Jun Azumi was commenting about the fact that the deficit
financing bill of JPY38.3trn has to be passed by the end of
September to provide cash for the government to operate.
The opposition parties caused delays to a similar
appropriation bill last year, and are expected to do so
again this time around. ***Ed: This is of course just
business as usual for Japanese politics, and no one wants
to be responsible for a fiscal meltdown just before an
election. There will be the usual amount of grimacing and
posturing, but in the end the spending bill will get passed
-- otherwise what was all the effort expended on the
consumption tax increase all about?** (Source: TT
commentary from rt.com, Jul 6, 2012)

Reflecting the realignment of Japan's major pension funds
into more foreign and alternative assets, as well as their
desire to work with just a few vendors, the Japan Pensions
Industry Database (JPID) has put out research showing that
the top asset manager is now BlackRock, and that the
company is pulling away from its competitors, Sumitomo
Mitsui Trust Bank and Mizuho Trust & Banking. BlackRock
now apparently manages JPY13.8trn, including the biggest
share of government pensions' money. Overall the Japan
pension's market is worth around JPY79trn, about JPY56trn
in government funds and JPY23trn in corporate funds.
(Source: TT commentary from ft.com, Jul 8, 2012)

After lots of bickering over price, the Ministry of Defense
has committed to buy four F-35A fighter planes at an
increased tag of US$128.61m each, about US$3.7m more than
the original price. Apparently the cost went up after the
US Department of Defense cut back its original order with
maker Lockheed Martin, forcing up the price due to
amortization of R&D costs. Japan plans to buy 42 plans,
training equipment, and spare parts over the next ten
years, at an aggregate cost of around US$66bn [Ed: give or
take a billion here and there...]. The Japanese apparently
decided on the F-35A's, even though they are still in
development, after becoming aware of the capabilities of
China's J-20 aircraft. ***Ed: Nice piece of business for US
defense industry, and a reaffirmation of the solid ties
between the US and Japan.** (Source: TT
commentary from defense-update.com, Jul 4, 2012)

Tokyo Metro is starting a new iPad-based interpreting
service for the deaf and also foreign tourists at 14
stations about the capital from August. Mori Building also
apparently is planning to install the same service, which
is provided by a company called ShuR and a related Call
Center firm called Rsystem. Initially English, Chinese, and
Korean will be supported. No word on whether foreign sign
language is on the list, although Japanese sign language
is. (Source: TT commentary from e.nikkei.com, Jul 7, 2012)

Japanese politics is sometimes so unimaginative that it is
easy to guess that PM Noda is now planning to call a
general election in October, just after the deficit funding
bill is due to be passed. The rumor that an election is
timed for Fall comes from an alleged comment by Noda to the
LDP recently, which was no doubt part of his consumption
tax negotiating strategy. ***Ed: For both the DPJ and LDP,
an election this year is far more desirable than one next
year, when increasing public opposition to nuclear power
and the ability of Ozawa's break-away party and Osaka's
Hashimoto to respectively organize themselves will be far
more developed. Who will win? Our guess is that there might
be hung result, and a DPJ/LDP coalition of sorts eventually
being formed. This assumes that Ozawa's break-away party
members mostly lose their seats.** (Source: TT commentary
from japantimes.co.jp, Jul 8, 2012)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

***------------------------****-------------------------***

---------- Japan Inc Communications: Now Hiring -----------

Japan Inc Communcations, publisher of the ACCJ Journal, the
official magazine to the largest foreign chamber of
commerce in Japan, is seeking a talented sales executive.

The job will involve listening to Presidents/CxOs of major
multinational companies, understanding their needs, then
coordinating with our various production teams to manage
the delivery of those services and projects to each client.

The ideal candidate will be bilingual, have a strong
interest in business and in meeting people, and able to pay
attention to detail and keep deadlines. This position is
open to both experienced and entry-level candidates. Apply
with resume to jobs@japaninc.com.
-----------------------------------------------------------

+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

** HIGHLIGHTED POSITION

BiOS is urgently looking for a Data Center Engineer to
provide media service support at our global financial
clients’ data centers in the Tokyo and Saitama areas. The
candidate will be responsible for setting up and removing
tape library equipment, updating the tape libraries, as
well as checking data availability. You will also be
responsible for coordinating vendor schedules, reporting to
data center leaders, and providing ad-hoc support at the
data centers.

Due to the technical nature and demanding work environment,
this position is suitable for someone with at least one
year of hardware support with user support background. In
addition, since this role requires direct coordination with
both regional and global IT teams, business-level English
and business-level Japanese will be required.

Every 2 weeks BiOS sends out a regular communication to its
job seeking candidates, called BiOS Job Mail. Every edition
carries a list of BiOS's current and most up-to-date
vacancies, with each entry featuring a short job
description and a direct link to the main entry on the BiOS
home page. Regardless of whether you are unemployed and
searching, thinking about a career change, or just curious
to know if there is something out there that might suit you
better, the BiOS Job Mail newsletter is an easy and
convenient way for you to stay informed. If you would like
to register for the BiOS Job Mail, or to find out more,
please email toshisada.onishi@biosjp.com.

Looking to reach out to key decision makers in Japan? With
our English & Japanese language ACCJ Journals, we have an
open line to CxOs of major American & Japanese companies in
Japan.

For the month of July and to celebrate Independence Day, we
are offering companies a 60% discount on any advertising
product in the ACCJ Journal if payment is settled by August
31st!

We are eager to support your strategic communications and
hope to hear from you soon. For more details, please
contact us in English or Japanese at 03-4550-2926 or emailsales@accjjournal.com.
-----------------------------------------------------

***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

---------------- Start a Company in Japan -----------------

Entrepreneur's Handbook Seminar 29th of September, 2012

If you have been considering setting up your own company,
find out what it takes to make it successful. Terrie Lloyd,
founder of over 17 start-up companies in Japan, will be
giving an English-language seminar and Q&A on starting up
a company in Japan.

This is an ideal opportunity to find out what is involved,
and to ask specific questions that are not normally
answered in business books. All materials are in English
and are Japan-focused.

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors@terrie.com.

=> No feedback this week.

***------------------------****-------------------------***

---------------------- MRI NETWORK ------------------------

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sciences, telecommunications and others.

Cape Ashizuri, the southernmost point of Shikoku, is part
of the Ashizuri-Uwakai National Park. It can be reached on
foot from the town of Ashizuri via a seaside walking path,
or you can drive all the way into the park through a
"tunnel" of camellia trees via the breathtaking "Skyline"
central road, which features steep climbs. The small tip of
land has been made into a park clustered with sightseeing
spots and featuring gorgeous ocean views from stunning, 80m
high granite cliffs. A 2 km wooded walking path winds
around the coastline from point to point, including stops
at the cape`s "Seven Mysteries," such as a supposedly
bottomless well.

For the best view, head straight up to the main observation
deck, Tengu-no-Hana, for a 270 degree seascape of the
sparkling Pacific. In this area the Japan Current makes its
closest approach to land, crashing and swirling violently
into the rocks below. The horizon curves out in an arc in
the distance, and a beautiful white lighthouse, built in
1914 and now a symbol of the cape, beckons from a nearby
point. If you`re very lucky, you might even see a whale!

The island of Kyushu is known for its volcanic activity,
and Mt. Aso -— an active volcano with one of the largest
calderas in the world (up to 25 km in diameter!). This
mountain should be near the top of your Kyushu must-see
list! Mt. Aso is a complex volcanic area consisting of an
outer ring surrounding several peaks and craters. It is
thought that it was created by four eruptions, the largest
and most recent occurring about 90,000 years ago. Mt. Aso’s
five main peaks rise up from the crater that formed when
the ground collapsed to fill the huge underground space
created by the spewed magma.

Mt. Aso’s unique ropeway (858 m, 4 min. run time) gives
visitors unusual access to the rim of the active volcano.
Unfortunately, it is often closed due to the noxious gases
pouring from the caldera, and I was unable to take it the
day I went. If you are lucky enough to go, you will smell
the sulfur and see the blue pool of water spewing volcanic
gases up close. A short walking path with various look-outs
allows amazing views of the area. There are also shelter
dugouts in case of emergency (eruption).

J@pan Inc is Japan's only independently published English-
language business website. Authoritatively chronicling
online the business trends in Japan, each posting brings
you in-depth analysis of business, people and technology in
the world's second largest economy.

Visit www.japaninc.com for the best business insight on
Japan available.
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